Court of Appeal for Ontario
Date: July 31, 2019 Docket: C65982
Justices: Huscroft, Trotter and Zarnett JJ.A.
Between
Barbara Thurston Plaintiff (Respondent)
and
Her Majesty the Queen in Right of Ontario as represented by the Office of the Children's Lawyer (Ontario) Defendant (Appellant)
Counsel
Vanessa Glasser, for the appellant
Tina K. Lee, for the respondent
Heard
June 24, 2019
Appeal
On appeal from the order of Justice Andra Pollak of the Superior Court of Justice, dated September 24, 2018, with reasons reported at 2018 ONSC 2137.
Huscroft J.A.
OVERVIEW
[1] Barbara Thurston (the respondent) is a sole practitioner lawyer who provided legal services to the Office of the Children's Lawyer (the "OCL") pursuant to a series of agreements over a period of 13 years, the last of which expired on March 31, 2015.
[2] The OCL did not renew her retainer following the expiry of the last agreement. The respondent brought a claim alleging that she was a dependent contractor and was therefore entitled to 20 months' notice of termination. The OCL brought a motion for summary judgment dismissing her claim. That motion was dismissed and the OCL appeals.
[3] I conclude that the motion judge erred in concluding that the respondent was a dependent contractor.
[4] I would allow the appeal for the reasons that follow.
BACKGROUND
The facts
[5] The respondent was a member of the OCL Personal Rights Panel, one of approximately 380 lawyers retained by the OCL to provide legal services in regard to custody, access, and child protection matters. She was first appointed to the OCL panel of lawyers in 2002, for a two-year period.
[6] The respondent remained a member of the OCL panel for the next 13 years pursuant to a series of fixed-term contracts, each of which required her to apply for reappointment as each contract expired. There was no automatic right of renewal for the contracts. However, on each occasion she was reappointed to the panel, initially for two-year terms and then from 2012 on an annual basis.
[7] The respondent maintained an independent legal practice while she was a member of the OCL panel, and that practice formed a majority of her billings. Her OCL work accounted for anywhere from a low of 14.8% to a high of 62.6% of her annual total billings. Over the 13-year period that she was on the OCL panel, OCL billings accounted for an average of 39.9% of her annual billings.
[8] The respondent's last retainer agreement expired in 2015. On March 31, 2015, the expiry date of that agreement, the OCL informed the respondent that her retainer was not going to be renewed. The respondent was given one year to wind down her existing OCL files and was not subsequently appointed to the OCL panel.
The retainer agreement
[9] The respondent's 2012 retainer agreement ran until March 31, 2013, but was extended from April 1, 2013 to March 31, 2014, and again from April 1, 2014 to March 31, 2015. It included the following provisions:
The term may be extended or subsequently renewed in the discretion of the Children's Lawyer.
No guarantee of work
The OCL makes no guarantee of the total value or volume of work to be assigned to you. You confirm that in your capacity as an OCL agent, you are not an employee of the OCL.
Termination of Agreement
In order to effect an orderly transition, you agree to give the OCL sixty days written notice of your intention to resign from the OCL panel…
The Children's Lawyer, or her designate, reserves the right, at her sole discretion, to terminate this retainer agreement at any time, without fault and without liability.
The motion judge's decision
[10] The respondent conceded that she was not an employee. The issues before the motion judge were whether the respondent was a dependent contractor and, if so, whether she was entitled to reasonable notice or payment in lieu of reasonable notice, despite the fixed-term nature of the retainer agreement.
[11] The motion judge found that the respondent's relationship with OCL was continuous for a 13-year period with no break. During that period, the respondent performed the work of the OCL under the OCL's control and was perceived by the public to be an employee of the OCL. An average of 39.9% of the respondent's total billings from her legal practice came from the OCL during the period in which she was on the OCL panel, and the trend was for an increasingly larger portion of the respondent's income to come from the OCL – reaching a high of 62.6% in 2012-2013, though dropping to 50% in the final year in which she was retained. In brief reasons, the motion judge concluded that these factors were sufficient to "tip the balance" in favour of a finding of dependent contractor status. In particular, the motion judge noted the permanence of the respondent's relationship with the OCL, the fact that she performed work that is integral to the OCL, and the public perception that she was an OCL lawyer.
[12] The motion judge rejected the OCL's alternative position that there was no obligation to provide notice or payment in lieu of notice at the expiry of a fixed-term agreement. She distinguished the cases proffered in support of the OCL's position on the basis that the respondent's contract was renewed for 13 years, without break in service, in addition to the factors outlined above. The motion judge dismissed the OCL's motion for summary judgment and seized herself of the trial of the notice and damages issues.
DISCUSSION
Jurisdiction to hear the appeal
[13] A preliminary issue arose concerning whether the appeal was properly before this court – in particular, whether the motion judge had made a final order concerning the respondent's status as a dependent contractor.
[14] The order dismissing the appellant's motion for summary judgment includes the following provisions:
THIS COURT ORDERS that the OCL had not met its burden of proof that Ms. Thurston was an independent contractor. Ms. Thurston was a dependent contractor.
THIS COURT ORDERS that findings of fact in relation to this motion, as stated in the Court's Endorsement, dated June 27, 2018, were intended to be binding on the parties.
THIS COURT ORDERS that the remaining issues for trial are the appropriate notice and damages, if any, to be awarded to Ms. Thurston.
THIS COURT ORDERS that the Honourable Madam Justice Pollak shall remain seized of the trial, provided the trial can be scheduled in a timely and expeditious manner without adverse delay or consequences to the parties.
[15] The wording of the order followed an exchange between counsel and the motion judge, after counsel for the appellant had taken the view that the motion judge had, in her endorsement, made no findings of fact or law in dismissing the motion for summary judgment, and that all issues were to be determined at trial. Counsel wrote to the court seeking clarification on the nature of her decision.
[16] The motion judge's assistant replied on behalf of the motion judge in an email dated August 8, 2018. The parties were informed that "on the issues put before the Court, findings of fact were made and intended to be binding on the parties. … The reference to there being no genuine issue for trial refers to the fact that the Court was able to make a decision with respect to the only issue put before the Court by the parties – that is the Plaintiff's status on the basis of the record before it." The only remaining issues concerned "the appropriate notice and damages to be awarded" to the respondent.
[17] I am satisfied that the motion judge's clarification confirms that she made a conclusive finding on the dependent contractor issue. This was the issue on which the motion depended. Although r. 20.04(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, is not cited in the email clarification, the rule was put to the motion judge by counsel for the appellant, her response is clear, and there is no doubt that the motion judge intended her determination to be binding on the parties at trial: Skunk v. Ketash, 2016 ONCA 841, 135 O.R. (3d) 180, at para. 58.
[18] Accordingly, this appeal is from a final order of a judge of the Superior Court of Justice and is properly before this court.
The respondent is not a dependent contractor
[19] Given the respondent's concession that she was not an employee of the OCL, it was necessary to determine only whether she was a dependent or independent contractor.
[20] The appellant submits that the motion judge erred:
in applying this court's analysis in McKee v. Reid's Heritage Home Ltd., 2009 ONCA 916, and Keenan v. Canac Kitchens Ltd., 2016 ONCA 79;
in failing to consider all of the relevant factors going to economic dependence, including whether any dependence was self-induced;
in concluding that the relationship was continuous for 13 years; and
in concluding that the OCL had a high degree of control over the respondent's work.
[21] The respondent submits that the motion judge's decision is a factual one entitled to deference on appeal, and in any event is correct.
[22] In my view, the motion judge misapprehended the nature of the legal standard and failed to give effect to several relevant considerations in applying that standard. The result is an unreasonable decision that cannot stand.
[23] As this court set out in McKee at para. 30, dependent contractor status is a non-employment relationship in which there is "a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity". "Minimum economic dependency" is a vaguely worded standard, and its application yields outcomes that are highly context-specific: McKee, at para. 38. It follows that a judge's decision as to the nature of a working relationship is generally entitled to deference.
[24] But the determination as to dependent contractor status must be made having regard to the purpose of the concept: the extension of the common law entitlement to notice of termination from employees to dependent contractors. That extension was justified in McKee on the basis that, like employees – and unlike independent contractors – dependent contractors are to a large extent economically dependent, albeit on a contracting party rather than an employer.
[25] In distinguishing dependent from independent contractors, McKee made clear that exclusivity of service provision, and therefore of income, is key. As the court put it, "exclusivity is determinative, as it demonstrates economic dependence"; exclusivity, the court said, is a "hallmark" of the dependent contractor category: McKee, at para. 34. In Keenan, at para. 25, this court emphasized that exclusivity was "integrally tied to the question of economic dependency" and that the determination of exclusivity requires consideration of the full history of the relationship in question.
[26] These two cases constitute the primary guidance from this court on the issue of distinguishing dependent and independent contractors. Since McKee was released in 2009, several lower court decisions have interpreted and applied the concept of "exclusivity" to determine a contractor's status. In several cases in which a dependent contractor relationship was found to exist, the relationship was absolutely exclusive in nature: see, e.g., Cormier v. 1772887 Ontario Limited c.o.b. as St. Joseph Communications, 2019 ONSC 587; V.P.M. Marketing v. Jenne, 2018 ONSC 4627; Tetra Consulting v. Continental Bank et al., 2015 ONSC 4610, and Ford v. Keegan, 2014 ONSC 4989.
[27] In cases in which a dependent contractor relationship was found to exist but exclusivity was not absolute, substantially more than a majority of the dependent contractor's income was earned from the contracting party: see, e.g., Beattie v. Women College Hospital, 2018 ONSC 1852; Sarnelli v. Effort Trust Co., 2011 ONSC 1080.
[28] In this case, there is no question that the respondent did not work exclusively for the OCL. On the contrary, the OCL expected her to maintain a private legal practice throughout the entire time that she was retained, and she did so.
[29] Putting the respondent's case at its highest, over the course of her retainer an average 39.9% of her annual billings came from the OCL. To be sure, that is a significant percentage of the respondent's billing, and the loss of the OCL retainer would have had a substantial impact on the respondent's legal practice and her income. But that is not determinative of her status as a dependent contractor. On no account can 39.9% of billings be said to constitute exclusivity or "near-complete exclusivity", such that economic dependence on the OCL is established.
[30] Exclusivity is a categorical concept – it poses an either/or question, and "near-complete exclusivity" must be understood with this in mind. "Near-complete exclusivity" cannot be reduced to a specific number that determines dependent contractor status; additional factors may be relevant in determining economic dependency. But "near-exclusivity" necessarily requires substantially more than 50% of billings. If it were otherwise, exclusivity – the "hallmark" of dependent contractor status – would be rendered meaningless.
[31] The motion judge did not properly take account of the following considerations:
the respondent's contracts with the OCL contemplated that she would continue her private practice and required her to confirm that she did not work exclusively for the OCL;
the respondent continued to operate her private legal practice during the entire period of her retainer;
the respondent was not guaranteed a minimum number of files or amount of work with the OCL;
the OCL reserved the right, at its sole discretion, to terminate the respondent's retainer agreement at any time, without fault and without liability;
the respondent had her own office, supplies, and staff; and
the respondent's private practice constituted the main source of her total income throughout the period.
[32] In short, the OCL was one of the respondent's clients – a very important client, but only one of her clients. The loss of a client will be more or less significant to any contractor, but care must be taken in applying dependent contractor case law to professionals such as lawyers working under retainer agreements.
[33] In this case, the respondent's loss of the OCL retainer results in a 39.9% reduction in the billings generated by her legal practice. That is a significant loss, but it is insufficient to establish the requisite economic dependency. As a result, there is no need to consider the appellant's alternative position that any economic dependence was self-induced.
[34] From the OCL's perspective, the respondent was one of many lawyers on retainer across Ontario. The longevity of the respondent's retainer with the OCL did not transform it into a relationship of "enduring dependency", as the respondent submits. The terms of the retainer make it plain that the respondent had no entitlement to any minimum level of work. Specifically, as noted above, the retainer agreement in place from 2012-2015 stated:
The OCL makes no guarantee of the total value or volume of work to be assigned to you.
[35] The motion judge's failure to give effect to these considerations renders her conclusion that the respondent was a dependent contractor unreasonable. The motion judge focused on the work the respondent performed for the OCL, noting that the OCL had a great deal of control over her work and working conditions and that the public perceived the respondent to be an OCL employee. But the OCL did not control the respondent's work in general, and its control over her OCL work was necessary given the nature of the relationship that the retainer established and the OCL's public function. Moreover, regardless of any public perception the terms of the contract clearly distinguished lawyers on retainer from OCL in-house lawyers. But the key point is this: only 39.9% of earnings came from the OCL during the relevant period. This cannot reasonably be categorized as a "near-exclusive" relationship without changing the nature of the legal test.
[36] The respondent argues that the only way that she could practice children's law was to do so with the OCL. That may be true, but it is irrelevant: the respondent had no entitlement to work in her preferred area of practice. She is in no different position than any other lawyer who has lost a preferred client. The terms of her retainer made the nature of her relationship with the OCL clear.
[37] This conclusion is sufficient to dispose of the appeal.
CONCLUSION
[38] I would allow the appeal and substitute an order granting the appellant's motion for summary judgment and dismissing the respondent's action.
[39] I would award the appellant costs of the appeal in the agreed amounts of $20,000 and $5,000 on the motion, both figures inclusive of taxes and disbursements.
Released: July 31, 2019
"Grant Huscroft J.A."
"I agree. Gary Trotter J.A."
"I agree. B. Zarnett J.A."
